The $6.5 billion venture, Cia Siderurgica do Atlantico, the largest private sector investment in 15 years, brings together mining giant Vale Doce and ThyssenKrupp.

President Luiz Inacio Lula da Silva marked the event in the company of Vale Doce Chief Executive Officer Roger Agnelli and ThyssenKrupp CEO Ekkehard Schulz.

The mill, owned 73.13 percent by ThyssenKrupp and 26.87 by Vale, will reach its full capacity of 5.5 million tons of steel within three to four years, officials said. Of that capacity, about 3.3 million tons will go to ThyssenKrupp's carbon steel operation in Alabama and 2.2 million tons to the company's European plants.

Once fully operational, the mill's production will enable Brazil to increase steel exports by 40 percent.

"The mill will reach full capacity just at the time when U.S. and European demand recovers," said Schulz.

Industry observers said the mill opening served Lula's political objective of building electoral support for his party's candidate Dilma Rousseff in the Oct. 3 presidential election.

The World Steel Association said Monday global steel production surged 29 percent in May 2010 from the level in May 2009 and the output exceeded levels before the economic crisis depressed demand.

The 66-nation trade organization said global steel production reached 146 million tons in May, against 105 million in May 2009, mainly in response to demand from China's booming economy.

Japan, the second-largest producer after China with 9.7 million tons, increased its production by 50 percent while the U.S. output rose 73.8 percent to 7.2 million tons. American steelmakers were surpassed by Germany, however, as steel production there rose 78.7 percent to 4.1 million tons.

The global economic downturn began to hit demand for steel from the second half of 2007 onward, as consumer spending on cars went down sharply and construction slowed worldwide.

"World crude steel production in May 2010 was 9.9 percent higher in comparison with May 2007, before the impact of the global economic crisis was felt," the association said in a statement.

It said that aside from China, steel production also rose in South Korea and Turkey, in response to recovery trends, but the U.S. production was below pre-crisis levels and production in Italy, Spain and Japan also had to catch up, the association said.

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